HCM City lenders' bad credit rate inches down

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HCM City lenders' bad credit rate inches down

Vietnam News - 8/12/2015 10:01:20 AM

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Non-performing loans (NPLs) of HCM City-based credit institutions by the end of last month stood at VND62.2 trillion (US$2.86 billion), equal to 5.49 per cent of total outstanding loans.

According to deputy director of the State Bank of Viet Nam's HCM City office Nguyen Hoang Minh, the rate inched down by 0.11 per cent from late June.

However, Minh said, if the NPLs of VNBC, OceanBank and GP Bank, which the central bank acquired all of their equity at a price of zero dong per share, were excluded, then the NPL rate of HCM City-based lenders was 3.7 per cent of total outstanding loans.

According to the central bank's plan, HCM City-based lenders would have to handle a total of VND25.3 trillion ($1.16 billion) in NPLs before September.

Minh said that by the end of last month, the lenders handled VND3.1 trillion ($142.85 million) in NPLs by using their provisional funds. They also sold another VND13.9 trillion ($640.55 million) in NPLs to the Viet Nam Asset Management Company.

Minh expected the lenders would meet the central bank's target to bring down the NPLs to 3 per cent by September this year.

According to the central bank's Governor Nguyen Van Binh, the target is feasible, provided that all credit institutions step up and take drastic measures to handle the NPLs to meet the deadline.

"Credit institutions must make accurate debt classifications, adequately fund risk provisions and actively sell NPLs to the Viet Nam Asset Management Company," Binh noted.

According to experts, the establishment of the Viet Nam Asset Management Company (VAMC) in 2013 was an important first step in recognising that NPLs in the banking system needed a systemic approach; however, the pace of selling these debts needs to be accelerated.

They said to move this process forward quickly, besides needing greater authority over the disposition of collateral and legal impediments and needing to resolve the disposition of collateral in the distressed assets market, the VAMC also needed a larger pool of resources – financial and human – to process NPLs that enter the distressed assets market.

Such a market in turn needed enough buyers and sellers to be functional and may need external participation and expertise, they said.

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